How Capital Gains Tax Affects You and Your Assets

Capital Gains Tax (CGT) on rental properties can be reduced. Here are some ways to lower your tax bill:

1. Private Residence Relief (PRR): If the property was your main home, PRR can reduce CGT. It covers the time you lived there plus 9 months before selling.
2. Letting Relief: This helps if the property was your home before renting it. You can claim up to £40,000 in relief, but only if you lived with the tenant.
3. Spousal Transfers: Giving property to your spouse can reduce CGT if they are in a lower tax bracket.
4. Timing Sales: Sell in different tax years to double your tax-free gains.

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Personal ownership is simple. You get lower interest rates on mortgages. You can also use the CGT exemption (£6,000 for 2024/25). However, mortgage interest relief is limited, and you face higher Inheritance Tax (IHT).

Company ownership allows full mortgage interest deductions. This can reduce your tax bill. Corporation tax rates are lower for companies. However, it comes with higher costs. You’ll face more admin and higher mortgage rates. There’s also an extra 3% stamp duty for companies.

The decision depends on your goals. Company ownership might save you tax but costs more. Personal ownership is simpler but could be more expensive long-term. Always get expert advice.

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When selling a buy-to-let property, several costs can be deducted to reduce your Capital Gains Tax (CGT). 

These include:

• Buying Costs: Purchase price, stamp duty, legal fees, survey costs, and valuation fees.
• Improvement Costs: Major upgrades like extensions, new kitchens, or heating systems.
• Selling Costs: estate agent fees, legal fees, marketing costs, and EPC fees.

For example, if you bought a property for £250,000, spent £45,000 on improvements, and incurred £8,620 in selling costs, you could deduct a total of £237,400 from the sale price.

Apex Accountants helps you track these expenses and optimise your tax planning.

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Business Asset Disposal Relief (BADR) helps lower Capital Gains Tax (CGT) when selling a business. It taxes gains at 10%, not the usual 20%. To qualify, you must own the business or shares for at least two years. You also need at least 5% of the shares and voting rights. The business must be a trading company.

BADR allows tax-free gains of up to £1 million in a lifetime. Timing is key. Make sure you hold the business for the required time before selling.

At Apex Accountants, we help you plan the best strategy to get the most out of BADR and reduce your CGT.

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Taxes like income tax, inheritance tax (IHT), and stamp duty impact capital gains tax (CGT). Income tax affects CGT rates. 

Basic rate taxpayers pay 10%, and higher rate taxpayers pay 20%. For residential property, rates are 18% and 28%.

Inheritance tax is paid on assets passed on death. CGT applies when the heir sells the inherited asset. Stamp Duty Land Tax (SDLT) increases property costs but is not deductible for CGT.

Apex Accountants helps with tax planning to reduce CGT, income tax, IHT, and SDLT. We provide strategies for:

• asset sales 
• inheritance, and 
• property transactions

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CGT isn’t always due. Here are some cases:

• Annual Exempt Amount: If your gains are below £3,000 in a tax year, no CGT is owed.
• Principal Private Residence Relief (PPR): Selling your main home is CGT-free if it was your main residence.
• Transfers to Spouses: No CGT when transferring assets between spouses or civil partners.
• Gifts to Charities: No CGT on gifts to registered charities.
• Personal Possessions Under £6,000: No CGT if items sold are worth less than £6,000.
• Wasting Assets: Items with a lifespan under 50 years, like cars or machinery, are exempt.

Apex Accountants helps you understand these exemptions and make the most of them. If you are unsure about your status, now is a good time to talk to our experts.

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Here are the key CGT deadlines:

• Annual Self-Assessment: 

Report by 31 January after the tax year. For a gain in 2023/24, report by 31 January 2025.

• UK Residential Property Sales: 

Report and pay within 60 days of sale completion. For a sale on 1 July 2024, report by 30 August 2024.

• Inheritance: 

If you sell inherited assets, report the gain by the normal deadline.

• Gifts to Spouse or Charity: 

No CGT on transfers to a spouse. Charities may pay CGT when selling gifted assets.

Keep detailed records of your transactions for five years. Use HMRC tools for guidance. Professional advice can help ensure accuracy and reduce errors.

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Capital Gains Tax (CGT) can take a large portion of the profit you make when selling assets. But there are ways to reduce or delay CGT, helping you keep more of your money. Here are some simple methods to cut down your tax bill:

• Keep assets for over a year to use the £3,000 tax-free allowance.
• If you lose money on one asset, use that loss to reduce tax on another gain.
• Invest in ISAs or pensions. Any profits in ISAs are not taxed.
• Move assets to a spouse with a lower tax rate to lower CGT.
• Business owners can pay less CGT on certain gains (as low as 10%).
• Sell assets after 5 April to delay paying CGT by a year.

Apex Accountants can guide you in making the most of these strategies to reduce CGT.

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UK residents must pay Capital Gains Tax (CGT) on overseas property sales. The annual exempt amount for 2024/25 is £3,000. CGT rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers on residential properties. For non-residential properties, the rates are 10% and 20%.

You must report the sale to HMRC, even if the gain is below the exempt amount. Double taxation agreements allow you to offset foreign tax against UK CGT.

If the overseas property was your main residence, Private Residence Relief may reduce CGT. Keep all records, including purchase and sale prices, improvement costs, and selling expenses.

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Some assets are not taxed under Capital Gains Tax (CGT) in the UK.

1. Personal vehicles like cars and classic cars are exempt.
2. Gifts to charities are tax-free, even if the asset has increased in value.
3. Government securities, like premium bonds, are exempt.
4. Personal possessions under £6,000, like antiques, don’t attract CGT.
5. Wasting assets (e.g., boats, machinery) are CGT-free.
6. Main residence relief: No CGT on selling your main home if you lived there the whole time.
7. ISAs and pensions: Investments in these accounts don’t incur CGT.

Knowing these exemptions helps in smart tax planning. Always consider professional advice.

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